Inflation Alert! Neel Kashkari, president of the Federal Reserve Bank of Minneapolis speak to NPR about inflation.
On NPR, Scott Simon spoke with Neel Kashkari, president of the Federal Reserve Bank of Minneapolis about inflation, the government response, and the economy's state in the district he supervises.
In the interview, Kashkari said many many sectors of the economy are seeing rapidly increasing prices and were struggling to adjust to reopening after the extended shutdown:
"Basically, what's happening is the U.S. economy went through a very abrupt shutdown a year ago,"
"And now it's going through a reopening, and you're seeing many sectors of the economy struggle to make that adjustment."
Kashkari keeps in lockstep with JPow (It doesn't appear that JPow needs to worry about Kashkari breaking with him publically):
I am in agreement with the Fed chair that we will return to a more normal pricing environment once the economy adjusts to the reopening.
"I'm not seeing any evidence yet that we're going to have sustained high inflation beyond this reopening period, whether that's six months or a year or 18 months. I'm not sure,"
I wonder how long until the goalposts on this start getting moved? We have reviewed this weekend how extreme weather here in the US is wreaking havoc on supply lines, compounding an already gummed-up system still trying to work through the bottleneck caused by the Ever Given in the Suez Canal--and that still has prices through the roof as well.
We discussed in Late June when Kashkari said he expected recent high inflation readings to be temporary and for Americans to return to the labor market in large numbers in the fall:
SIMON: that all that government money pumped into the economy and low-interest rates creates jobs but inexorably increases prices. And at some point, there's a trade-off. What do you believe?
KASHKARI: Well, I think at some point, there will be a trade-off. I think that's right. But it's very hard for me to understand how the economy is going to overheat, which is what these folks are basically saying if we still have 7 to 9 million Americans who are unemployed. Those folks represent part of our economic potential. Let's see what happens and what the economy looks like once we get everybody back to work.
Without new jobs (we have covered previously ~15 million people are claiming unemployment compensation), and with the Delta variant likely to cause havoc regionally (especially in the south), I don't believe The Fed can count on employment being as hot as they hope. Unemployment and Inflation traditionally have an inverse relationship. Additionally, the 'Great Resignation' has also picked up steam!
Remember to watch actions, not what is said! The Fed is woefully behind, while others are taking action.
TL:DR โ I believe inflation is the match that has been lit that will light the fuse of our rocket.
